Michael Shvo

Are you going to buy in `25? If so, what asset class?

At Shvo, our investment philosophy remains steadfast, regardless of market fluctuations. We are long-term, strategic investors with a singular mission: to elevate super-prime real estate and, in doing so, elevate the lives of those who interact with it. Our focus is singular and precise — we seek to acquire the top 10 buildings in the top 10 gateway cities across the United States. These are not short-term plays for us; they are investments we intend to hold for the long haul, and we execute these acquisitions in partnership with our European institutional investors, who share our commitment to excellence and sustainability. 

As we look to 2025, I continue to be a firm believer in the long-term value of super-prime office buildings, particularly in markets like New York City and San Francisco. These cities remain global powerhouses, and, despite short-term market volatility, they have consistently proven their resilience and importance. We are always actively seeking opportunities to expand our portfolio — provided they meet our strict acquisition criteria. However, we understand that the type of properties we target are incredibly rare and selective, and as such we approach each opportunity with patience and discipline.

What sets Shvo apart is our vision for the future. While others may react to market shifts, we remain focused on our core strategy and long-term goals. We don’t chase trends — we invest in iconic assets that will continue to stand the test of time, ensuring their relevance and value for generations to come.

Is there a single “good” sign you see in a distressed property that makes you want to buy it?

We focus exclusively on super-prime real estate, which means that distressed properties do not typically fall within our acquisition strategy. Our investment philosophy centers on the inherent value of trophy assets — properties that are irreplaceable due to their unique location, design and long-term desirability. The beauty of investing in super-prime real estate is that these assets have a proven track record of resilience, regardless of market conditions. There is always demand for them, whether from tenants, lenders or future buyers.

While we recognize that market dislocations can create opportunities in certain sectors, we are not drawn to distressed properties. The assets we target are the best in their class, and they tend to weather economic storms more effectively than others. The true value of a trophy asset lies in its enduring appeal — there will always be a tenant who values its location and prestige, a bank willing to lend on its security, and a buyer ready to acquire it when the time is right.

In short, while there may be “blood in the streets” during times of market stress, the streets where we invest are always those where the fundamentals remain strong and the long-term outlook is clear. We focus on acquiring properties that will continue to appreciate in value, not based on short-term distress, but because they represent the highest tier of real estate in the most sought-after markets.

What real estate or tax policy would you like to see from a Trump administration?

Given the current political landscape, it appears increasingly likely that the Trump administration could extend the tax cuts implemented during his previous term, especially with Republicans now controlling both the House and the Senate. This would be a positive development for the real estate market, as it would provide much-needed tax relief and encourage increased investment across a wide range of sectors, including real estate.

One of the most impactful policies for the commercial real estate market would be the potential reinstatement of bonus depreciation. This provision has historically been a major driver of investment in real estate, as it allows businesses to accelerate the depreciation of their assets, offering significant tax savings in the early years of ownership. In the past, this has stimulated capital spending, enhanced liquidity for investors, and created a virtuous cycle of growth. Bringing back bonus depreciation would not only incentivize new construction and development but also encourage businesses to reinvest in their properties, further driving demand for commercial space.

Additionally, Trump’s proposals to reduce corporate tax rates could have a far-reaching effect on the broader economy, stimulating corporate spending and driving overall business growth. Lower corporate taxes would enhance cash flow for businesses, allowing them to expand, hire, and invest in capital improvements — all of which would have a positive ripple effect on commercial real estate. Increased demand for office space, as well as the ongoing trend of high-end retail and mixed-use developments, would likely follow as businesses seek premium locations to match their growing needs.

We are already seeing a noticeable shift in sentiment following the election. The business community and real estate industry alike are starting to feel more optimistic about the future, particularly as confidence in a pro-growth economic agenda takes hold. With policies aimed at fostering economic expansion and reducing the tax burden, we can expect to see a reinvigoration of investment activity, which would be a boon for commercial real estate.

At Shvo, we believe these policies could contribute to a long-term, stable growth trajectory for the market — especially in the super-prime sector, where businesses and investors alike seek out the highest-quality assets. As a long-term investor, we are confident that such policies would not only bolster the economy, but also enhance the value and resilience of the iconic properties we acquire and develop.

Let’s talk about office. Is the worst over?

When it comes to the office market, the worst appears to be over for trophy assets, but the picture is still mixed across different segments. In recent months, we’ve seen a significant rise in demand for high-end office space, especially in the most sought-after locations. Rental rates for super-prime office buildings in gateway cities like New York, San Francisco and Miami have reached all-time highs, driven by renewed corporate demand for quality, flexible spaces. 

For example, office leasing rates in Manhattan’s top-tier buildings have increased by over 15 percent in the past year alone, as businesses seek to secure prime locations for their post-pandemic return to the office. This demand has translated into record rents and low vacancy rates in the trophy sector, particularly for Class A and Class A-plus properties.

However, the broader office market continues to face challenges. The B and C class buildings — which make up a significant portion of the office inventory — are still struggling due to the oversupply and low demand. These buildings face higher vacancy rates, declining rental rates and limited demand, as companies prioritize quality over quantity when selecting office space. The gap between the performance of super-prime assets and lower-tier buildings has never been more pronounced.

Overall, while the worst may be behind us for the ultra-premium office market, the rest of the office sector will likely take longer to recover. 

Let’s talk about retail. What kind of tenant do you want?

When it comes to retail tenants, we focus not only on the credit rating and financial stability of the tenant but also on the type of tenant and how they contribute to the overall experience and prestige of the building. We believe that the right retail partners can elevate a property and help create a unique sense of place — one that adds to the vibrancy and allure of the surrounding area.

For example, in San Francisco, we’re developing an entire city block of restaurants and food offerings around the Transamerica Redwood Park. This curated collection of high-end dining and culinary experiences will not only serve as a key amenity for office tenants but will also attract locals and tourists alike, further enhancing the value of the property. We view this as an opportunity to transform a traditional office space into a dynamic, mixed-use environment where food and culture become integral to the building’s identity.

Similarly, along Fifth Avenue in New York City, we are focusing on ultra-luxury fashion retail tenants — brands that align with Shvo’s commitment to the highest quality. These flagship retailers not only provide exceptional value to our buildings but also reinforce the global appeal and prestige of the locations we invest in. The tenants we select must be in line with our vision of creating iconic, timeless assets that attract the world’s most discerning clientele.

Ultimately, the right retail tenant is one who complements the broader vision for the building, enhances the overall tenant experience, and adds lasting value to the property. We see retail as a key element in creating high-performance real estate that stands the test of time.

Let’s talk about multifamily. Do you ever see yourself building normal, middle-class rentals again? What would stop you?

No, we do not see ourselves building traditional middle-class rentals. I strongly believe that developers should focus on what they do best. Our expertise lies in the super-prime, ultra-luxury real estate segment, where we specialize in owning, operating and developing iconic properties. We have built a reputation for transforming the highest-caliber assets in the most sought-after markets, and that remains our focus.

While we recognize the value in the middle-class rental market, it’s simply not within our core competency. We are committed to maintaining a portfolio that reflects our expertise in ultra-luxury properties, which includes office buildings, luxury condominiums, high-end retail and hospitality spaces.

The ultra-luxury segment is where we see the greatest potential for long-term growth and value creation. Our vision is to continue investing in properties that are unique, timeless and irreplaceable — assets that will stand the test of time and elevate the cities in which they exist.

Which market (outside of NYC) do you like best? 

Outside of New York City, we have a strong preference for both San Francisco and Miami. I’ve long been a supporter of San Francisco, especially given our ownership of the Transamerica Pyramid Center, a full city block that is widely regarded as one of the city’s most iconic properties. Despite the challenges posed by the pandemic, many of which led others to question the city’s future, we’ve continued to invest heavily in San Francisco — over $1 billion to date. This long-term commitment is beginning to pay off.

For example, we’ve experienced significant rent growth, with the Transamerica Pyramid seeing a rise of up to 250 percent compared to pre-COVID levels. We’ve also leased office space for as high as $275 per square foot. These results are a testament not only to the substantial improvements we’ve made to the building itself, but also to the renewed confidence that corporations have in San Francisco’s future. The city continues to be a critical hub for the tech industry, and, with the rise of AI, San Francisco’s economic prospects are further bolstered. It remains one of the most attractive markets in the world for innovation and investment.

We have also made significant and ongoing investments in the Miami Beach market, where demand has remained strong and consistent over the past four years. In 2020, we spearheaded a zoning change along Collins Avenue to create what has become known as “Billionaires’ Beach” — the most coveted stretch of oceanfront real estate in Miami. This prime area spans from Lincoln Road to 21st Street on Collins Avenue, with our centerpiece development being the 3-acre Raleigh Hotel and Residences.

In addition to our residential investments, we are also developing several high-profile commercial properties, including The Alton, a Class A office building designed by the renowned architect Lord Norman Foster, and One Soundscape Park, an ultra-luxury boutique office building crafted by the legendary architect Peter Marino. These projects are setting new standards for office space in the region, and we continue to witness record-breaking sales prices for our residential developments and strong demand for ultra-prime office properties in Miami Beach.

What’s going to be your biggest expense in 2025: Capital, insurance, labor, land or supplies? Something else?

In 2025, our biggest expenses will likely be driven by three key factors: people, insurance and construction costs.

First, people — our team and talent — are always our most valuable asset. As Shvo continues to expand and develop landmark properties, attracting and retaining top-tier talent across all facets of the business, from development to operations, will remain a significant investment. In the ultra-luxury real estate space, the caliber of professionals we employ is critical to the success of our projects, and we are committed to fostering a team of experts who can bring our ambitious vision to life.

Insurance costs are also expected to rise, especially in the face of increasing global risks, climate-related events and market volatility. As developers of iconic properties in major urban centers, comprehensive coverage is essential to safeguard our assets and mitigate potential risks, and this comes at a significant cost.

Finally, construction costs will continue to be a major factor, particularly with inflationary pressures on labor and materials. As we develop high-end properties, from luxury office buildings to premier residential and hospitality assets, maintaining the highest standards of quality and design requires considerable investment in construction, which remains one of our largest expenses.

Together, these elements — people, insurance and construction — are the backbone of our business, and, while they represent significant expenses, they are essential to ensuring the continued success and growth of Shov’s portfolio.

How’s the financing climate for new development and redevelopment — hot, cold or just right? 

Financing for trophy assets has always been available, and in today’s market it’s becoming increasingly competitive. As a result, we’re seeing more favorable terms for high-quality developments, particularly in ultra-prime locations. Even before the recent election results, there was renewed energy and optimism in the commercial real estate market. Condominium sales have remained strong, and office leasing activity is on the rise, particularly in core markets like New York City and Miami. These trends signal a return of investor confidence in high-end real estate.

With the shift in the political landscape, we anticipate a significant boost in sentiment, both from investors and lenders. A pro-growth agenda, including tax cuts and regulatory reforms, will likely create a more favorable environment for financing, especially for high-caliber projects. We expect to see greater liquidity in the market and more aggressive lending as banks and financial institutions regain confidence. This will be particularly beneficial for developers focused on high-quality assets, like those we specialize in at Shvo.

Additionally, the recent drop in interest rates has further helped to improve the financing climate. Lower rates mean more attractive debt terms, which enhances the affordability of new developments and makes large-scale redevelopment projects more viable. This is especially crucial for trophy assets, where the cost of capital is a key factor in determining returns. The combination of lower rates and increased market optimism provides a unique opportunity for developers and investors to secure financing at favorable terms, positioning premium real estate projects for success.

Overall, the financing climate is transitioning from cautious to more optimistic, with increased competition among lenders to fund premium developments. As long-term investors, we welcome this shift, as it aligns with our strategy of acquiring and developing the best real estate assets in the most desirable markets.

Lightning Round

Your social media of choice? 

If I must, Instagram

AI: Helpful in CRE or a fad? 

Helpful everywhere. Changing the world at lighting speed, and boosting out leasing at Transamerica Pyramid in San Francisco. 

Last movie you saw in a theater? 

“Wolfs.”

You’re going on a six-month expedition into the Amazon rainforest. What’s your last meal before you get on the plane? 

My wife’s Shabbat dinner.

Tesla or BMW? 

Rolls-Royce.

Will interest rates be below or above 4 percent on July 1, 2025? 

Yes.

If you could partner with one person in the business on a property, who would it be? 

Jony Ive.

What are you tired of talking about? 

The misconnection of work from home.